In 2023, pork producers did a better job of managing risk and that’s made a big difference. Steve Meyer, chief economist – livestock for Ever.Ag, says this is one of the reasons he hasn’t heard of many wholesale bankruptcies this year despite negative profit margins.
“I think producers have paid more mind to risk management issues,” Meyer said at the Ohio Pork Congress. “The problem is the year after the crash is the one that you never really get a chance to manage risk to some degree. I think everybody’s still in a crisis mode of trying to make sure that their equity stance lasts long enough that they can stay in this business.”
Meyer says the outlook isn’t “rosy,” but it’s certainly better so far in 2024 and herd health around the country is in better shape than it was two years ago. The challenge for producers is managing their businesses to survive this downturn.
“We continue to see estimated cost of production slide,” he adds. “It slid by about probably $7 or $8 per hundredweight since December, as corn and soybean meal prices go down. We see some rally on lean hog futures for the summer up into the upper 90s. My profit model, which said minus $12 or so back in December, says minus $2 now.”
He urges producers to stay focused on playing defense. Nobody’s balance sheet looks anywhere near what it did two years ago, he adds, because of the losses incurred last year. Because of that, producers can’t stand any more losses.
“Be aggressive about trying to put floors under your prices and leave top side open, put lids on your costs and try to leave the bottom side open on those,” Meyer advises. “On the cost side, we’re going to be in this situation where we’re going to be very dependent on what the weather does with the North American crop. I still think you’re playing defense as you manage your price arrangements for 2024.”
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